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US Stocks Dip Further Wednesday - 2001-08-30

U.S. stock prices lost more ground Wednesday, as investors were faced with more confirmation of a sluggish economy. New GDP figures show the U.S. economy is still breathing, but just barely. The major stock indices all gave up more than 1 percent. The Dow Jones Industrial Average dropped 131 points to 10,090. The broader Standard and Poor's 500 index lost 12 points, while the tech-weighted Nasdaq composite sank 21 points.

The government released new figures for second quarter Gross Domestic Product. They were revised downward. The U.S. economy grew at a pace of just .2 percent. It was the worst performance in more than eight years, but still better than expected. Many economists were anticipating flat to negative growth.

The data sparked an early rally in the stock market, which then fizzled fast. Experts say there was nothing new in the data to inspire enthusiasm among investors.

Analyst Art Cashin says, "When the GDP number came out and was not as negative as it had first looked, people starting hyping the idea, 'hey, maybe this is going to be the turnaround number.' Not at all. First of all the data is two months old. And only if it was a major surprise would it have meant something. The traders here were kind of shocked when they were hearing from Chicago and other places that this could be the rally tool."

What is not old data is the bleak corporate earnings outlook for the rest of the year. This is the reality that continues to threaten investors' portfolios.

The incredibly shrinking fortunes of once high-flying companies are making news almost every day. A second Wall Street brokerage firm Wednesday cut next year's earnings forecast for Sun Microsystems, a leading maker of computers and software, citing weak demand.

Meanwhile, trading on Wall Street remains thin, typical of late summer activity. Many investors are on vacation as the country heads toward a long Labor Day weekend.